Term structure and the sluggishness of retail bank interest rates in euro area countries

Benoit Mojon, Natacha Valla and Gabe de Bondt

No 518, Working Paper Series from European Central Bank

Abstract: This paper analyses the pricing of bank loans and deposits in euro area countries. We show that retail bank interest rates adjust not only to changes in short term interest rates but also to long-term interest rates. This result, which is arguably intuitive for long-term retail bank rates, is also confirmed for bank interest rates on short-term instruments. The transmission of changes in short-term market interest rates along the yield curve is found to be a key factor explaining the sluggishness of retail bank interest rates. We also show that in the cases where we cannot reject that the adjustment of retail rates has changed since the introduction of the euro, this adjustment has become faster. JEL Classification: E43, G21

Keywords: euro area countries; market interest rates; retail bank interest rates (search for similar items in EconPapers)
Date: 2005-09
Note: 1792986
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Citations: View citations in EconPapers (95)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005518

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